An airline has the following data about an airplane Annual lease cost 10,000,000 Lease term 28 years Useful life of airplane 35 years Fair market value or leased asset $85 million Present value of lease payments $75 million Bargain purchase option none Transfer to lessor st end of lease yes Is this finance an operating less? Why A. This is an operating lease. It fails all the finance lease criteria B. This is an operating lease because it meets at least one of the five operating lease criteria C. This is a finance lease because the leased asset cost exceeds $5 million. D. This is a finance lease because it meets at least one of the five finance lease criteria.
An airline has the following data about an airplane Annual lease cost 10,000,000 Lease term 28 years Useful life of airplane 35 years Fair market value or leased asset $85 million Present value of lease payments $75 million Bargain purchase option none Transfer to lessor st end of lease yes Is this finance an operating less? Why A. This is an operating lease. It fails all the finance lease criteria B. This is an operating lease because it meets at least one of the five operating lease criteria C. This is a finance lease because the leased asset cost exceeds $5 million. D. This is a finance lease because it meets at least one of the five finance lease criteria.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
An airline has the following data about an airplane
Annual lease cost 10,000,000
Lease term 28 years
Useful life of airplane 35 years
Fair market value or leased asset $85 million
Present value of lease payments $75 million
Bargain purchase option none
Transfer to lessor st end of lease yes
Is this finance an operating less? Why
A. This is an operating lease. It fails all the finance lease criteria
B. This is an operating lease because it meets at least one of the five operating lease criteria
C. This is a finance lease because the leased asset cost exceeds $5 million.
D. This is a finance lease because it meets at least one of the five finance lease criteria.
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